EADS released these photos of the KC-30 MRTT refueling fighters. The company previously released photos of refueling as viewed through the 3D controller’s panel video screen. The MRTT has now “passed gas” (as we like to say, much to the consternation of the more straight-laced crowd) through the new flying boom from the MRTT.

Source: EADS North America

These delayed tests have been the target of much criticism from Boeing supporters, who pointed out that EADS has been delayed in meeting milestones for the Royal Australian Air Force deliveries, which are now 18 months late. About six months of the delay was due to customer change-order requests.

US Airways early this morning announced it has deferred deliveries of 54 Airbus wide- and narrow-body airplanes from 2010 to 2013 and beyond, including the A350 from 2015 to 2017.

While a blow to Airbus on the one hand, it could help the company win the order on at United Airlines on the other.

The battle between Boeing and Airbus to win United’s order heated up significantly from our October 21 report in which we noted that, at the time, United was leaning toward Airbus. Since then Boeing has come on strong with the 787 to Airbus’s A350. The Chicago Tribune has this report on the competition.

The A350 deferral by USAirways opens up early delivery positions in 2015 for United. The lack of early delivery slots has been on on-going problem for both Airbus and Boeing, with the large backlogs for the A350 and 787 programs. Boeing, of course, has had some 80+ cancellations for the 787 and a number of deferrals. There has been a debate within Boeing whether to release these positions to Sales to offer to potential customers such as United; or for Production to retain the slots as a means to catch up on nearly three years of delays. We don’t know if this debate has been resolved one way or another, or if some slots have been returned to Sales and others kept by Production or how the Line 2 decision plays into this.

What we do know is that at least initially Boeing has been challenged in offering early slots to United.

The now-open 2015 slots for the A350 could be a tipping point in the campaign unless Boeing can do better. As always, pricing and financing offered by both sides will be important, too.

As for the single-aisle campaign, this won’t begin until next year.

The Center for Asia-Pacific Aviation (CAPA) reports that Qantas of Australia now only lists 25 firm 787 orders and 25 rights to purchase the airplane in its latest fleet plan. Boeing still shows 50 orders by the airline, which previously had 65 on order but  canceled 15 and restructured the delivery stream on the rest.

Update, Nov. 24: CAPA has now published this addition to the news link; the chart referred to below in contained in the article linked above):

[Correction: Qantas advises that the following chart, contained in its Investor Presentation, should in fact reflect the fact that there are 50 firm orders for the B787, not 25 firm and 25 purchase options, as illustrated]

Key points:

• The ability to increase production rates to sell more 767s in the coming years;
• Lower production costs, which will be built into the KC-X bid in the hot competition with the expected Northrop Grumman KC-30 submission.

Boeing’s proposed KC-767 refueling tanker will benefit from plans to establish a surge production line for the 787 program.

The connection is not obvious, for Boeing didn’t suggest as much when it announced that Charleston (SC) will be the location for the second 787 production line. As Line 2 is being established, Boeing will put a “surge” 787 line in Everett (WA), where Line 1 is located. The surge line will be in the forward bay where the 767 line is, requiring relocating the 767 line to the aft part of the bay.

Boeing plans to implement Lean production practices in the relocated 767 line, which has its origins for the airplane’s 1982 entry-into-service date. Lean practices will result in about “a 20% improvement in unit time as we increase [the production] rate and incorporate efficiencies,” a 767 program spokesperson tells us.

Boeing will begin to relocate the 767 line in 1Q2010; it will be operational in 1Q2011.

The efficiencies include:

• New tool designs with new technology and automation that will reduce flow, rebalance the line and improve assembly efficiencies;
• Improving employee ergonomics;
• New tooling to reduce the flow required to assemble the wings, which improves inventory holding costs and quality and overall costs;
• Laser alignment in place of manual tools; and, among other things,
• Incorporating auto-riveting and drilling to improve unit time and quality.

The smaller footprint also will allow Boeing to streamline processes and consolidate support.

Boeing declined to quantify the before-and-after employee head count for the 767 line.  But the spokesperson said that a planned production rate increase in 2011 from one to two 767s a month will require the addition of “several hundred people in various skills.

“The increased efficiency means we will increase by less than we would have and build a better product. The increase in efficiency will allow us to sell even more 767s in the next few years.”

These benefits have clear implications for the prospect of building the KC-767 tanker should Boeing win the contract, which the USAF hopes to award in August next year (a goal we believe may be optimistic, given the political meddling that is going on). Most observers already believe a protest by the loser is likely, further delaying the contract.

Assuming Boeing selects the KC-767 as its choice to bid for the Air Force’s KC-X (which we think will be the case), the lower cost of building the airplane will be reflected in Boeing’s bid price, the 767 spokesperson confirms. With the competition so far emphasizing cost rather than value in the Draft RFP (Air Force rhetoric to the contrary notwithstanding), this should Boeing an additional advantage over the larger Northrop Grumman KC-30, based on the Airbus A330-200, which has a higher list price than Boeing’s 767-200ER on which the KC-767 is based.

The Air Force currently plans to procure its KC-X at the rate of 12-18 a year, or 1 to 1 ½ a month. The KC-X must also be what is called ITAR-compliant, which means access to military-unique equipment must be controlled during production. The new, Lean line will be prepared for ITAR requirements, says the  Boeing spokesperson.

Boeing faces the challenge of relocating the line while the 767 is in production.

“We will continue to build airplanes sections in our current tools and location during the product line relocation,” the spokesperson tells us. “This process will require a synchronized, highly sequenced series of activities to minimize disruption. Concurrently, we will be reactivating rate tools, upgrading and incorporating improvements, adding new technology and moving and building new tools as part of this relocation activity. As a standard practice, we maintain and use our existing tools until tool tryouts are complete for all-new, upgraded, reactivated and moved tools. This is how we will mitigate disruption to our active production line.”

Although our emphasis in this column is how Lean will aid Boeing in a KC-767 bid cost basis, the hints that Boeing may gain more 767 sales in connection with  the 787 surge should not be overlooked, either.

Arabian Business quotes Boeing CEO Jim McNerney as saying more job cuts will be seen at the company next year as defense business declines.

We’ve just finished reading “Fly By Wire: The Geese, the Glide, the Miracle on the Hudson,” by William Langewiesche.

It’s about US Airways 1549, the Airbus A320 pilot by Chelsey Sullenberger and Jeffrey Skiles, forced to make an emergency landing in New York City’s Hudson River last January 15.

We’ve also been reading the reviews and reaction to the book, including Sullenberger’s reaction. We wonder if we’ve been reading the same book as the critics, who dispute the contribution the A320’s fly-by-wire system made to the safe landing.

To read the critics’ response, including Sullenberger, one would think Langwieche gave all the credit to the A320 for the safe landing and none to the flight crew. Nothing could be further from the truth.

Langewiesche gives full credit to the skills of Sulley and Skiles for their actions in the short, 3 1/2 minutes from impact with the geese to landing in the water. He is generous with his superlatives in describing Sullenberger’s skill, calm and split-second decision-making.

The point of his book is to examine the fly-by-wire design of the A320 (and subsequent Airbus airplanes) and discuss how, in this case, the system contributed to the safe landing. His is not an either-or proposition; it’s an “and.”

Sullenberger rather grumpily responds that he would have made a safe landing in a conventional Boeing 737 that doesn’t have fly-by-wire. Whether he would have or not will always be a matter of conjecture. One can only wonder what might have happened to United Airlines Flight 232, the DC-10 that crash-landed at Sioux City, Iowa, despite the superb skill of the cockpit crew had the DC-10 had fly-by-wire to help stabilize the airplane.

Langewiesche details Sullenberger’s quick decisions made under high stress. While Skiles was occupied trying to restart the two engines, Sullenberger had to evaluate glide ratios, heights, distances and immediately conclude he didn’t have enough altitude to get back to LaGuardia Airport. Sullenberger immediately decided to turn on the APU, even though this is not part of the engine-out procedures. The APU permitted generators to work after No. 2 engine completely failed on its own and after Skiles shut down No. 1 (part of the procedure) in a last-ditch effort to restart the engine, less than a minute before impact.

In effect, the fly-by-wire acted as the third pilot, enabling Sullenberger to fly to a successful landing. The plane couldn’t have landed safely without Sullenberger and Skiles at the controls. Whether Sullenberger could have safely landed the airplane without the fly-by-wire may be answered when the NTSB issues its report. But it seems clear he was helped.

The book is not without its flaws. It becomes tedious in spots as Landewiesche seems to be including stuff more to fill space than add to the story–a routine set of exchanges between a controller and a series of flights takes up the better part of two pages. And, like Langewiesche’s excerpt earlier this year in Vanity Fair, he takes forever to get to the point. We skipped over many, many pages because we were bored (exacerbated by the fact we had read the Vanity Fair piece when it came out and were equally bored then). But once he got to the point of 1549 itself, we found the interaction between Sullenberger, Skiles and the fly-by-wire quite interesting.

Why people are reacting as they are is a mystery. Langewieche takes nothing away from the pilots in writing his book.

Inside Defense, a subscription-only publication, today reported that a former defense procurement official believes the current KC-X tanker Draft RFP may violate the law. Here is what Inside Defense sent out in the public domain:

Former Top Procurement Official Questions KC-X Compliance with New Acquisition Law

The Pentagon’s solicitation for the KC-X aerial refueling competition is inconsistent with the 2009 Weapon Systems Acquisition Reform Act and may violate the law, according to a former top federal procurement officer.

That critique, by Robert Burton, a former deputy administrator of the Office of Federal Procurement and Defense Department veteran, comes as a powerful lawmaker and a key architect of the recently enacted weapon systems acquisition reform law — Sen. John McCain (R-AZ) — is raising questions about whether the KC-X draft request for proposals, issued on Sept. 25, complies with the new act.

In an October 19 letter obtain by Inside Defense, Burton writes that the DRFP is “inconsistent” with the Weapons Systems Acquisition Reform Act of 2009 by failing to “provide for trade-offs between cost, schedule. and performance….” This is “clearly inconsistent with the intent of the law and Congress’ desire to maximize competition and minimize risk.”

Burton goes on to write the the USAF is “inviting significant risk” by conducting a 15-year fixed price competition. He calls it “highly unlikely” that the presumed offerers, Boeing and Northrop Grumman, will submit bids that will be within 1% of each other–a key parameter in the RFP–thereby awarding the contract to the smaller airplane “with minimal capabilities.” Although Burton doesn’t say so, this clearly suggests Boeing’s KC-767 will be the winner.

Burton cites Section 201 of the WSARA is applicable in which “trade-offs among cost, schedule and performance are considered as part of the requirements process.”

More on WTO

Meanwhile, the Lexington Institute’s Loren Thompson published this piece about “Why Boeing thinks subsidies matter,” prompting this rebuttal from a consultant to Northrop.

After Thompson published his piece supporting inclusion of the preliminary WTO ruling that Airbus improperly benefited from subsidies, we emailed Thompson asking why he continually ignores Article 23 of the WTO rules that prohibit self-help before the case is finalized (the issue addressed in the Northrop rebuttal). Thompson did not respond (not atypical, by the way).

We have maintained from the day the WTO Interim Report was issued that while Boeing and its supporters believe the finding that Airbus violated WTO rules should be considered by the USAF, Article 23 prevents this and to do so would violate WTO rules. That the final report rarely changes is academic (and the operative word here in any event is “rarely;” this doesn’t mean “never”). If Boeing and its supporters are sticklers for the rules on the one hand, they can’t ignore the rules on the other.

We’ve also maintained that if the USAF changes its collective mind and decided the Interim Report finding will be considered (Article 23 notwithstanding), we’ve said doing so in the absence of the pending WTO findings in the EU case against Boeing subsidies will generate a protest from Northrop should Boeing get the contract. Every observer, including some inside Boeing, believe the WTO will uphold some of the EU complaints against Boeing.

We may not have much longer to wait for the WTO Boeing Interim Report. We are getting indications that the report may be issued before the end of the year. (The operative words are “indications” and “may.”) If so, then watch the Airbus/EADS/Northrop crowd and their supporting politicians whinge on about including the Boeing findings in the Final RFP (Article 23 notwithstanding).

Defense Secretary Robert Gates had hoped this Round 3 would be free of corporate food fights and political interference. We thought at the time this veteran of Washington who is now serving his sixth President was being naive.

As we told KOMO Radio (Seattle) in a recent interview about the tanker competition, “We can’t wait for the damn thing to be over.”

The Renton (WA) Reporter has this story that Boeing will continue to build the 737 into the 2020 decade, further extending the timeline for a replacement aircraft, says Mike Bair, vice president of Business Strategy and Marketing for the company.

This is highly significant on a number of levels. First, it tends to match the timeline Airbus has already foretold about a replacement for the A320 about 2024. Neither company can really afford to undertake yet another new airplane program, given the cost overruns and customer penalties for their respective A380, A400M, 787 and 747-8 programs. Airbus is also engaged in R&D for the A350, with a price tag of roughly $15bn. With engineering and production resources stretched already, there simply are limitations for Airbus on taking on an entirely new development program.

For Boeing, the situation is compounded. The company also faces what to do about meeting the A350 threat to its successful 777 line. Although Boeing is looking at major derivative upgrades to the airplane, it is also necessary to consider an entirely new aircraft. The last thing Boeing needs is a requirement to develop a successor to the 737 on top of this-especially when decisions have to be made in what will now be the early years of the 787 entry-into-service.

Bair’s revelation that Boeing now looks to the 2020 decade for a replacement 737 also signals, at least to us, the increasing likelihood that Boeing will re-engine the 737 for greater fuel efficiency circa 2015, meeting a requirement sought by Southwest Airlines and other customers. Southwest is Boeing’s largest 737 customer, ordering more of this type since it was formed in 1971 than any other airline or lessor.

Airbus plans to decide by the end of next year whether to re-engine the A320 family. Boeing will certainly match any plan to do so to keep the 737 competitive.

Moving replacement airplanes out to 2024 gives both companies the 7-8 years or more needed to recover R&D costs for a re-engined airplane. Boeing CEO Jim McNerney said a few months ago that a derivative 737 would cost 20%-40% that of a new airplane and that the business case for a re-engined model is better than originally thought.

Update: Defense News just published this article detailing the continuing problems Boeing has with the KC-767 Italian tanker, including the centerline hose-and-drogue problems we previously exclusively revealed in this column.

Original Post:

With Boeing and Northrop Grumman still in the Q&A stage with the USAF in advance of a Final Request for Proposals in the KC-X competition, we predict that Boeing will offer the KC-767 and not the KC-777.

Here’s why:

• Boeing simply cannot afford another new airplane program right now. The KC-777 is only a concept airplane; Boeing would have to sink billions of dollars into the development of this derivative aircraft. The cost overruns and customer penalties for the 787 and, to a lesser extent, the 747-8, are already squeezing the company. Boeing is faced with the larger problem of potentially launching an entirely new airplane program in 2011-13 to replace the 777 to meet the forthcoming Airbus A350; or a enhanced derivative of the 777; and a re-engined 737 or a successor airplane, also within the 2011-2015 period.
• The company has billions in “sunk costs” in the KC-767 International program. Financially, it makes far more sense to offer this airplane to the Air Force.
• Offering a tanker based on the 777 will open Boeing to WTO issues. The European Community identified the 777 as a major beneficiary of “illegal” subsidies in its complaint to the WTO against Boeing. As long as US interests are attacking illegal subsidies provided Airbus on the A330-based KC-30 offered by Northrop Grumman, any 777-based tanker will similarly come under attack, assuming the WTO rules in the EU’s favor, as expected.
• The 767 is less likely to trigger WTO issues. Launched in 1982, the 767–although included in the EU’s broad-based complaint (if we recall correctly)–the amount of “illegal” subsidies, if any, pales to that alleged for the 777.
• Boeing still has development issues with the KC-767I (Italian) version. We understand the centerline hose-and-drogue system now is causing Boeing headaches. (Boeing declines comment.) Still, the last thing Boeing needs are the risks associated with an entirely new tanker in the KC-777.
• A Boeing executive spilled the beans and said publicly, in front of more than 100 people, that the company was “leaning” (his word) toward the 767.

Evening Magazine, a 30-minute feature program by KING5 TV (NBC-Seattle) aired two segments November 4 about Boeing. The first is called “Boeing’s Secrets,” a feature about places, things or companies that the ordinary Joe doesn’t ordinarily know about (catchy phrase, there, eh?). The second is about Boeing’s Aircraft Psychology (no jokes or cracks, now–this is an upbeat and interesting segment). Both are about 2 1/2 minutes.

Both videos are on the KING5 website, precluding inserting them here.

Here is the Boeing’s Secrets video.

Here is the Boeing’s Aircraft Psychology video.